tv Nightly Business Report PBS September 17, 2012 7:00pm-7:30pm EDT
>> this is n.b.r. >> susie: good evening. i'm susie gharib. tom is off tonight. a war of words between the white house and china over trade. the obama administration complains about new trade abuses on auto exports, china fires back on unfair trade practices by the u.s. from stocks to oil and gold prices, we get the outlook for what to expect between now and the end of the year. and a birthday for "occupy wall street". while protests and arrests mark the movement's first anniversary, a look at what it's accomplished. that and more tonight on "n.b.r."! trade tensions between the united states and china are heating up again. this morning, the two countries challenged each other in the
world trade organization. the u.s. is accusing china of illegally subsidizing auto and auto parts exports, and hurting u.s. made goods. and china claims trade laws here, open the door for illegal tariffs on a wide range of chinese products. sylvia hall breaks down what's behind the latest flareup. >> reporter: here in the u.s., the auto and auto parts industries employ about 800,000 american workers. the government says those workers are hurt by the money china gives to subsidize its own auto industry. and in ohio, a key swing state fueled by cars, president obama promised a crack down: >> these are subsidies that directly harm working men and women on the assembly lines in ohio and michigan and across the midwest. it is not right, it is against the rules, and we will not let it stand. >> reporter: the administration said that between 2009 and 2011, the chinese government offered up at least $1 billion in subsidies to its auto and auto
parts exporters. the u.s. claims those subsidies allowed chinese products to be sold at artificially low prices across the world, altering global trade, and violating the agreements made by members of the world trade organization, or w.t.o. >> the charge that's being made is that the type of subsidies which the chinese government is offering to a range of companies, chinese companies, are what's called contingent on export, and if that's the case, then that's clearly a breach of the subsidies agreements and china's commitments under the w.t.o. >> reporter: if the accusations are true, the subsidies are not just hurting u.s. manufacturers at home, but also abroad as they sell detroit's finest around the globe. of the $350 billion worth of cars and auto parts produced here last year, $123 billion were exported. today's action came just as china challenged a u.s. trade law passed in march. china claims that law allows for unfair tariffs on a wide range of chinese-made products.
of course, today's action also comes in the midst of a heated presidential campaign. republican candidate mitt romney accuses president obama of playing nice with china. many see this action as a chance for the president to look tough before the november election. >> there's nothing really new about the trade allegations that have taken place. the timing is political opportunist for both sides however, this is not an indication that the us and china are headed to a trade war, and this is not an indication that either side takes trade enforcement lightly. this is simply a taking a trade issue and framing for a moment of political convenience for both sides. >> reporter: sean west of the eurasia group says when it comes to the w.t.o. rules, the u.s. and china both get as close to the lines as possible and aren't scared to file complaints when the other one goes too far. sylvia hall, "n.b.r.," washington. >> susie: meanwhile, general motors and the u.s. treasury are throwing water on a report in today's wall street journal, that said the automaker is pressing uncle sam to sell its
stake in g.m. the government owns more than 26% of g.m. it received the shares after investing $50 billion to keep assembly lines rolling. but if it sells now, it would post a loss, as much as $15 billion. g.m. stock is trading around $24, well below its $33 i.p.o. price. still ahead, gold has been a winner thanks to the fed's stimulus plan. where do prices go from here? we'll get some answers from joe doe of the street.com. on wall street today stocks ended a four day winning streak. investors took profits on concerns about a surprising drop in oil prices. we'll have more on that in a moment. by the close, the dow lost 40 points, the nasdaq was down five, and the s&p off four-and- a-half points. until now, stocks had been powered higher on hopes of the federal reserve taking action to stimulate the economy. with that done, what's likely to drive the markets going forward? ruben ramirez reports.
>> reporter: when the federal reserve announced last week it will open its pocketbook, investors piled into everything from stocks to gold. but with a weekend to think about the potential impact of the fed's actions, investors had new questions. >> the real question facing investors is will this liquidity morph into a growth rally. will the central bank action actually translate into better economic data, better earnings data. >> reporter: s&p expects third quarter earnings to be down about 2% from the same period last year. >> the third quarter is widely expected to be pretty soft. it's the fourth quarter and next year where things are widely expected to accelerate and that's why guidance is going to be so important. >> reporter: beyond earnings, young says wall street is focused on the u.s. presidential election. >> the markets are pricing in an obama win, and should that happen it shouldn't have a huge impact on the market because that's what the market is expecting. should romney win, i think there is upside potential for the
market especially if he's able to couple that with a senate win for the republicans. >> reporter: while many u.s. investors are focused on november 6, wells fargo's paul christopher says global forces could quickly grab the market's attention: >> a continued deceleration in the chinese economy beyond the end of this year would be a negative for markets, that's not priced in. secondly, further violence in the middle east whether it be in north africa or syria, or especially iran continued deterioration there would also have to be priced in terms of the effect on oil prices and the third would be if spain does not ask for its bailout within the next month or two. come thursday, the next piece of economic data on the docket will be a preliminary look at the global manufacturing picture. market watchers will be looking for signs that it may have hit a bottom. ruben ramirez, "n.b.r.," new york.
>> susie: back now to today's oil prices, they tumbled abruptly in mid-afternoon on rumors that u.s. and european leaders were planning a coordinated release of oil from emergency stockpiles. the white house denied the speculation. crude futures tumbled 2.5% to $96.62 a barrel, they were closing in on the $100 mark early this morning. joining us now, john kilduff, founder and oil analyst with again capital. john, despite all the denials are you expecting some kind of release of emergency oil in the coming days? >> yes, in the very near future, susie, i think the $100 mark is the level which will trigger this. we went above it last week. we flirted with it this morning as you mentioned. and i think that's going to bring on a global coordinated release. >> susie: but what would really trigger s it price or is it tensions between israel and iran, is it
worries about the global economic growth outlook? what would trigger such a move? >> well, i think it's all that. certainly the tensions around iran's nuclear ambition, the embargo that the eu has against iran. iran's output really is down more than a million barrels a day and over the summer we had quite a bit of problem getting it out of the north sea due to heavy maintenance schedule. that has gotten the oil markets somewhat tight around the world. and i think given the fragility of the economy the western country kos lose some of their barrels out into the market, incremental barrels that would help calm down this price. and as you saw today there is a trapdoor under this market if they do so. it will work. it will work for a time. they will have to come across with pore and promise more but it will work. >> susie: let's talk about where oil price kos go from here. let's look at this graphic where we see oil prices have been moving up very sharply since the end of june, up
almost 30%. you know, before today's pullback. what price level do you see from here. let's say there is a release of new oil supplies on to the world markets. where does the price of oil go? >> well, you think beyond that, part of the rally has been due to support from expectations about monetary policy. we got it from ben bernanke. we're still waiting for it to a full degree from the ecb. but it's run its course, i believe, and what oil has to do unlike gold and silver, it's got to pay tribute to the fundamentals of supply and demand. the demand outlook susie is deteriorating on a daily basis, particularly as you look into next year with the slowdowns in the economy in china which is a swing demand center for the world, europe and even here. so with that i believe oil prices are in the process if they haven't already. and back into the low to mid 80s by the end of the year, i believe. >> susie: mid to low 80s by the end of the year.
okay so, what would this mean for gasoline prices. let's look here at this graphic with the lates oil prices nearing the $4 a gallon level. they were 3.60 or so a year ago where. do you see gasoline prices going if oil gets into the 80 dollar range? >> you would see it fall back towards that $3.50 level which would be a huge boon back for consumers. the $4 mark is clearly the breaking point for the u.s. consumer. we've been down this road twice now in the last couple of years. both times we saw a diminished consumer confidence and diminished gdp readings right in the aftermath of that simply because this is a redirection. you can't spend your money at the store, vacations and other things if it goes not gas pump and it's worse than a tax increase because it is really a transfer of wealth to oil-producing countries. >> susie: real quick question here, let's say that there isn't a whole bunch of new oil supplies on
the market. and oil stays at this $100 level which is the saweddio arabia oil minister says 100 is the floor price can. the world economy handle $100 oil? >> no, i don't believe so you will's see solid recessionary economic readings in europe. china too will suffer even more. their gdp numbers will go down and we too will flirt with a sub2% growth level then. at this point it will be that much of a drag. at least a good half to maybe a full percentage point you off if this were po persist for several months. >> susie: all right, we'll see how it plays out. john, thanks a lot. john kilduff of again capital. s
>> susie: the battle between chicago teachers and mayor rahm emanuel moved from the picket line to the courtroom today. the mayor and the chicago school system asked the court to end the strike, calling it "illegal". in illinois, strikes are only permitted if they relate to wages and benefits, but the school system argues the teachers are focused on other issues like layoffs and class sizes. a judge is scheduled to decide whether to end the strike on wednesday morning, but the chicago teachers union could end it as soon as tomorrow, if it passes the latest contract proposal. the strike started last monday.. and affects almost 350,000 students. today is the one year anniversary of the "occupy wall street" movement, and with it came protests and arrests. hundreds gathered near the new york stock exchange, and despite the celebrations and carnival atmosphere, police still arrested dozens of protestors. since "occupy wall street" began a year ago, it kicked off a nationwide social movement to
protest income disparity, corporate greed, and the influence of money on politics. today's protests were mild compared to the thousands of protestors who gathered in zucotti park a year ago in the heart of new york's financial district. so did the "occupy" movement make a difference? joining us to answer that... rob johnson, former chief economist for the u.s. senate banking committee, and now director at the institute for new economic thinking. rob, thanks for joining us. let me begin by asking you did the occupy movement make the difference? >> yes, i think if made a difference. it raised our awareness of inequality. and the deterioration of the middle class. the united states has seen rising inequality for almost 40 years and it's now a household concept and they did change the climb at with their prowess-- profests. >> susie: well, certainly it
did raise awareness about the grievance of the american people but what did the movement really accomplish? >> well, i think it set in motion a change in the climate which has changed the dialogue in the presidential election, even when newt gingrich was fighting in south carolina with mitt romney over the role of bain capital. that's a reflection of an agenda that wasn't there prior to occupy. >> rob, i know are you not a spokesperson for the movement but where do you think it goes from here? what do you think that the people who support this movement want to accomplish going forward? >> well, i think the initial stages were diagnosing and identifying and announcing the problems. the movement is going to play a constructive role in the next chapter it's going to have to come up with prescriptions and remedies to repairing both policy and our political process in the
heavy money leyden lobbying laden political process that can obstruct constructive change. >> susie: you're very familiar with the ways of washington. i mean what kind of power mechanism does do they have to accomplish something like that? >> well, they themselves do not have obviously a lot of money. but raising awareness to the unfairness of outcomes of the difficulties which the tea party people sympathize with as well. the bailouts and bonuses that were paid, after the banking bailout and tarp have enraged a lot of these people and i think they're putting a lot of pressure on both parties. you're seeing primaries from the right among republican tea party members who are anti-washington. i think that energy's picking up and building up, occupy contributes to it from the left. and i think we're headed towards systemic reform and you might say some revisitation
of how politicized the supreme court has become. >> a real quickly rob because we have less than 30 seconds. a year from now what do you think we'll be saying about occupy wall street? >> i think we'll be saying they identified and underscored the problems that are still still a work in progress but will be on our way towards a more manageable situation. and hopefully greater focus on job growth in a new obama administration or a new romney administration. >> susie: rob, thanks for sharing your insights, we appreciate it, rob johnson, director at the institute for new economic thinking.
the major averages fell for the first time in five sessions today, as stocks followed oil prices lower on light volume. with many traders out for the jewish new year, volume on the big board fell to 663 million shares. 1.5 billion traded hands on the nasdaq. the materials sector lead the way lower, down 1.5%, followed lower by the financial and energy sectors. in materials, steel-related stocks tested investors metal. j.p. morgan downgraded several players, from overweight to neutral, on weak pricing and demand for steel. coal and iron ore producer cliff's natural resources, a.k. steel, u.s. steel and reliance steel, all down 4% or more. investors also taking a bite out of netflix, after macquarie started coverage at underperform. netflix shares tumbled $3.50 or 6%, to $57.02, the firm's concerned about weak subscriber growth, and the cost of content.
it has a $50 price target on netflix. apple shares headed in the opposite direction, as the iphone 5 rang up big sales: 2 million pre-orders in just 24 hours; with those pre-orders in mind, piper jaffray analyst gene munster, says the launch weekend could see as many as ten million iphone 5's sold. apple shares continue, at record highs, up $8.50 to just shy of $700 a share. the stock crossed the $700 mark in afterhours trading. an after-the close drop in shares of chip maker advanced micro devices. the stock closed the regular session at $4.01 and fell almost 8% afterhours, on word c.f.o. thomas seifert is resigning to pursue other opportunities. turning to buyout news: learning tree, moving sharply higher. the company's c.e.o. offers to take the education company private in a deal that values the firm at $69 million. learning tree shares, rising $.89 or 21% to $5.14 a share,
shareholders would get $5.25 a share. office depot spiking higher as activist investment fund "starboard value" unveiled a 13% stake in the retailer. starboard calls office depot shares, "deeply undervalued"... the stock up 5% today to $2.60 a share. morgan stanley upgrading shares of tesla motors, sending the stock zooming higher, delivery delays have plagued the electric vehicle maker, but morgan says tesla has the ability to significantly outperform. tesla shares jumped 7% to $32.54. morgan stanley also lifted its price target on the shares to $50, from $45. vivus shares gaining some weight, as the company rolled out its obesity drug, ahead of schedule. quseemiah, was supposed to debut next quarter, the company says it's now available for prescription. that early release, sending vivus shares up 4%, to $3.85, a one-month prescription costs $184.
as for our most active exchange traded funds and notes, the i- path short term futures note, leading the way lower, down 1.2%. and that's tonight's "market focus." >> susie: gold has been shining recently: prices have jumped more than 10% in the past two months. gold closed down slightly today at $1771 an ounce. what's outlook from here, and what's the best way to invest in gold? so tonight's word on the street: gold. joining us, joe "doe" reporter from the street.com.
where do price goes from here on gold? >> well, in the very short term like this week you might see gold just trade sideways but people can't forget global troubles, specifically the eurozone, there is a lot of talk about stimulus in the eurozone, possibly with spain, other countries. and if that stimulus hits you'll see another gap newspaper gold. in fact an analyst this morning was telling me this 12 month projection he could see gold ounces going for as much as $2300. >> susie: and what is really going to drive that? yes, i hear but tensions in the world. but you know, what's the real driver here, what are analysts telling you? >> well, analysts are saying that maybe we should also look at some stocks. obviously you're going to see gold gap up because of global easing and markets like brazil and even in china. but you really do have to look at some of these gold mine errs. they are the ones you can make a little profit on as the price of gold goes up.
>> yeah, and analysts have been giving you the names of a couple good gold mining stocks. let's go down some of them. let's pull up the chart of barrick gold and looking at the chart, a very nice move on this stock since august. why should investors take a look at abx. >> well, people have to look at barrick because they have a large amount of production. and when the price of gold goes up, that means that they are going to have a higher cash flow. these companies like barrick, they are cash flow positive. but we're also going to see with someone like barrick is their margins, their operating margins are going to open up. the problem for someone like barrick has been the past six months the operating margins were squeezing because of high operating margin inflation. but now with the price of gold going up those margins are going to open up. >> let's look at your next one, newmont mining. why do analysts single out this company? >> so newmont mining is a household name.
and analysts was telling me this morning that your generalist investor looking at them for exposure. and they're seeing that large cap company like new month is very attractive because of the liquidity that the company brings. but beyond the liquidity you also realize that it is a high cost producer. and it has a large amount of resources. so they can scale up the size of the project that they have in place already which makes it a great investment opportunity for anybody whose looking for growth in a company. >> all right, and a third company to consider which is not a household name like new month is a small gold mining company you tell me about, allied nevada gold. ticker symbol anz. what is the story on this one? >> allied nevada has a large development production that is low grade in nevada. and the balance sheet looks pretty healthy and a lot of people are saying that the stock is very price sensitive. so low grade production in nevada means investors can immediately see if the
operating margins of this company gap up with the price of gold. it's right here in the united states. and so when they see that they will see there is enough leverage for the share price of this company to jump up. in very quickly and respond very quickly. but finally they're also going to see a massive increase in production. they are at about $150-- 150,000 ounces of gold and will jump up to 580. >> susie: lots to think about. do you have disclosures to make. dow own any of these stocks? >> i do not own any of these stocks, no. >> susie: joe, thanks, a lot, joe deaux from thestreet.com. tomorrow on "n.b.r." we talk to ford c.e.o. alan mulally, we'll visit him a ford dealership, and take a look at the new ford fusion. then, hershey has a big announcement, we'll head to pennsylvania and talk to the c.e.o. about what they're up to, and how much money does the u.s. owe, and how did we get here? we kick off this week's coverage of the national debt.
the u.s. presidential election is just seven weeks away, and the economy remains the key issue. but as tonight's commentator explains, the u.s. economy isn't simply stuck in a bad business cycle, it's suffering from an innovation crisis. here's rob atkinson, author of "innovation economics: the race for global advantage." >> many nations are competing intensely to win this race, offering competitive corporate tax policies, increased investment in technology and training, and other smart policies. in the last decade, the united states has fallen behind. declining competitiveness means not just anemic job growth today, but relatively lower living standards in the future. so the next administration regardless of who it is and congress need to do more than tinker at the edges. we need to replace the failed washington economic consensus with a new innovation consensus. we need to reduce the tax burden on companies that compete globally. we need to boost government
support for r&d and training. and finally, we need to draw the line when countries break the rules of global trade to take our jobs. the united states can win the global innovation race but only if we decide we want to. i'm rob atkinson. >> susie: and finally tonight, a milestone for the u.s.a. that's nightly business report for monday, september 17. good night everyone. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org